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Can You Keep a Secret? Your Company’s Confidentiality Policy May Violate the National Labor Relations Act




by:
Kindall C. James
Liskow & Lewis A Professional Law Corporation - Houston Office

Wm. Brian London
Liskow & Lewis A Professional Law Corporation - New Orleans Office

 
May 15, 2014

Previously published on May 6, 2014

Policies prohibiting the disclosure of proprietary business information are prevalent in modern workplaces. Employers have long assumed that these types of policies are lawful, or at the very least, that they would not be of interest to the National Labor Relations Board (“NLRB”). Based on recent rulings, however, those assumptions may no longer be accurate.
 
Over the past several years, the NLRB has challenged the legality of a number of workplace confidentiality rules. These policies, in the Board’s view, unlawfully infringe on employees’ rights under Section 7 of the National Labor Relations Act, which protects employees’ rights to “bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection-” Section 8(a)(1) of the Act makes it an unfair labor practice for an employer to interfere with employees’ rights under Section 7.
 
The NLRB has recognized that employees have a Section 7 right to discuss their wages and other terms and conditions of employment with their fellow employees and with non-employees, such as union representatives. Thus, a workplace rule that precludes employees from discussing the terms of their employment, or sharing information about their wages with outside parties, violates Section 8(a)(1). Even policies that do not expressly prohibit wage discussions have been found unlawful in some cases.
 
Last month, for example, the Fifth Circuit Court of Appeals in Flex Frac Logistics LLC v. NLRB upheld an NLRB ruling that a broadly worded confidentiality policy violated the NLRA—even though the policy did not expressly mention employee wages. Flex Frac, a non-unionized trucking company based in Texas, required its employees to sign a policy prohibiting them from sharing “confidential information” with anyone outside the organization. The policy defined “confidential information” to include not only traditional forms of trade secrets (such as customer and supplier lists, price schedules, and business plans), but also “financial information” and “personnel information and documents.” It also stated that a violation of the policy was grounds for termination.
 
Despite the fact that Flex Frac had never applied the policy to prohibit wage discussions and that employees may not have actually believed the policy restricted their Section 7 rights, the NLRB’s general counsel issued a complaint alleging that the rule unlawfully prohibited employees from discussing their wages. An administrative law judge agreed. Although there was no express reference to wages, the ALJ found the policy unlawful because it was overly broad and contained language that employees could reasonably interpret as restricting their Section 7 rights. The NLRB later affirmed the ALJ’s ruling in a split decision.
 
On appeal, the Fifth Circuit agreed with the NLRB’s conclusion that Flex Frac’s employees could reasonably believe they were forbidden from discussing their wages, despite the absence of any express language in the policy to that effect. The court reasoned that, by broadly designating “financial information” and “personnel information” as confidential, without giving any indication that wages were excluded from these categories, the policy left employees under the impression that they were not free to discuss their wages with anyone outside the company. The court held that the mere fact that the policy could have a “chilling effect” on Section 7 rights was sufficient to violate the NLRA, regardless of how the rule had been interpreted or enforced.
Conclusion

Employers should review their confidentiality policies to ensure they do not run afoul of the standards expressed in Flex Frac and other similar cases. Confidentiality policies should be narrowly tailored, and it may be advisable to include a disclaimer stating that employees are not prohibited from discussing their wages or other terms and conditions of their employment.



 

The views expressed in this document are solely the views of the author and not Martindale-Hubbell. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.
 

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Author
 
Kindall C. James
Wm. Brian London
Practice Area
 
Labor & Employment
 
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